Fees paid to individual banks for handling stock market flotations should be disclosed, according to an influential body of shareholders, as part of a series of proposals to overhaul the way companies raise billions of pounds a year.
The Association of British Insurers (ABI) also wants companies attempting to float on the stock market to issue the detailed financial information about their business a week earlier than is currently the case to make it easier to price the shares.
The ABI, whose members put billions of pounds of investors' cash into company fundraisings every year, wants shareholders to receive more information about the fees paid to the lineup of banks which advise companies on stock market flotations and cash calls. The fees paid are currently aggregated and the ABI is suggesting that these are broken down. The ABI also wants to have a say in whether any additional success fees should be paid to the banks.
The ABI also suggests that a smaller number of banks should be involved in the syndicates which back the fundraisings and argues that retail investors should be given more opportunities to buy shares.
"Investors want to see a flow of high-quality, well-prepared and well-run companies coming to the market. Equally they must be able to understand the investment case and value the asset properly," said Robert Hingley, director of investment at the ABI.
The ABI argues that if companies issued their prospectuses a week earlier it would help banks provide better estimates of the price range at which the shares will be sold. The association would also like discussions between the prospective shareholders and the companies to start a year before a possible flotation, also known as an initial public offering (IPO).
The ABI is proposing to conduct further analysis of fundraisings by companies which are already listed on the stock market and attempting to raise more money. Shareholders usually demand pre-emption rights, which give them an opportunity to buy the shares before new investors to allow them to maintain the same level of influence over the company.
"Pre-emption as the cornerstone of this system is a major strength and remains highly valued by investors. Greater clarity is needed surrounding what is acceptable to investors in relation to non pre-emptive placings," the ABI said.
It conducted a review of the way the current market operates following the report for the government by John Kay on encouraging long-term investment.
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